Monthly Archives: November 2011

The Individual Investor is Alive and Well

Last week I spent several wonderful days attending the biennial conference of the American Association of Individual Investors (AAII).  Despite their frequent depiction of being unsophisticated or, even worse, blind followers of obvious market trends, the individual investors I met were nothing like that.  They were all intelligent, hard working, successful and experienced folks who shared a deep passion for taking charge of their portfolios and financial wellbeing.  That said, their approaches to getting this done was as varied as their home towns or how they had made their money.

I met people who strictly employed the “do-it-yourself” method of investing.  They were assiduous students of the investment process and market mechanics.  They quoted Buffett, Lynch or Paul Tudor Jones as readily as a high school student can recite the latest Katy Perry song.  Others preferred to use professional managers, but held them to a very high standard of above-market returns.  Yet others had found “the secret” of investment (at least for them) and used it (there were many, many of these “secrets” to be found) exclusively and religiously.  There were some folks just starting out, who seemed a bit dazed by all the volatility of the markets over the last few quarters, and others who had been investing for over four decades.  All in all, I found it to be an exhilarating experience.

The professionals at the conference were there to offer their perspectives on the markets or the process of investing, pitch their versions of “the secret,” move a few newly-published books, opine about a wide range of related topics and/or provide encouragement to the group.  Experts in security analysis, trading, hedge funds, value investing, index investing, behavior science and many other areas all vied for the attention of the attendees.  All of the presentations and workshops I attended were excellent.  It was highly reassuring to hear the time-tested investment philosophies I was raised on praised, reiterated and confirmed time and again by many of the experts there.

Space does not allow a comprehensive summary of the things I heard and learned, but let me share with the reader a few of the pithier quotes I was able to capture.  Attribution of the speaker will be shared only off line, if anyone really cares to follow up with me.

“Looking the history of the market, we see that the November to April timeframe usually offers the best returns for any given 12-month period.”

“You pay a hefty price for a cheery consensus” – someone quoting Warren Buffett, who must be the patron saint of the individual investor…

“Value and dividend paying stocks look poised to do well going forward.”

“People are not rational, they are normal.  That is, sometimes we’re smart and sometimes we’re stupid.”

“Intuition is insufficient alone to invest successfully.”

“Hindsight fools us into thinking that we should have known something in foresight as well.”

“The economy tends to grow at irregular rates.  There has never been an economic recovery that is “regular.”

“Bad behavior is always bad.”

“U.S. Presidential elections are always bullish events.”

“Smart investors create their own luck.”

It was very encouraging to see so many people dedicated to helping individuals make better sense out of the complex exercise of investing.  Well done, AAII!